United States: Highest EU Court: Skype Is A Regulated Telecommunications Services – Gmail Is Not

Summary

In two long-awaited decisions handed down yesterday and last week, respectively, the European Court of Justice (ECJ) had the opportunity to decide the fate of online or "over-the-top" (OTT) communications services under European telecommunications law – but it left several key questions unresolved

In last week's decision, the ECJ found Microsoft's Skype to be a regulated electronic communications service (ECS) within the meaning of EU laws, at least as far as the "SkypeOut" feature, which allows users to place calls to fixed or mobile devices, is concerned. In contrast, the ECJ decided yesterday that Google's email service Gmail does not qualify as a regulated service – however, without a fully comprehensive reasoning.

The two decisions bring only limited clarity to the issue of whether online communications services must generally comply with the same telecommunications laws as "traditional" telco services provided by fixed or mobile service providers. While the ECJ confirmed that services with a breakout to the public telephone network are likely to be regulated, the regulation of all other OTT services will continue to depend on a case-by-case assessment of the service's functionalities and their technical implementation. It is therefore likely that further clarity will only be achieved once the EU Member States have implemented the new Electronic Communications Code that the EU adopted in December 2018, and that specifically includes OTT services in its scope.

This alert is relevant for all providers of online communications services.

Underlying Issue: A Level Playing Field For All Communications Service?

Over the last few years, an ongoing discussion has evolved on whether OTT communications services (e.g., instant messaging apps, voice/video call services, or even email services) should be regulated in the same manner as traditional telecoms services (e.g., voice telephony or data services via fixed or mobile networks). The discussion was particularly driven by established telcos demanding a regulatory "level playing field."

This controversy has a significant practical impact on the providers of OTT communications services, because as long as they do not qualify as regulated telecommunications services, a number of regulatory requirements do not apply to them: there is no notification obligation, access and price control do not apply, compliance with specific consumer protection rules is not mandatory, and—probably most importantly—OTT service providers are not required to allow extensive lawful interception by the police or other law enforcement authorities. As a result of the latter, OTT messaging services are currently not subject to the same telecoms surveillance measures as, e.g., SMS services.

Against this background, several national regulatory authorities initiated administrative proceedings against different types of OTT communications providers:

  • In 2011, the Belgian national regulatory authority (NRA) initiated proceedings arguing that Skype's "SkypeOut" telephony feature should be regulated as a telecoms service, and it tried to enforce the notification obligation that applies to such services under Belgian law. Skype allows users to place voice or video calls to other Skype users. With the "SkypeOut" feature, users can also place calls to fixed or mobile endpoints in the public switched telephone network (PSTN) via regular phone numbers, i.e., they can "break out" of the Skype network into the networks of other carriers. And while Skype is generally provided free of charge, users must pay a fee to use the "SkypeOut" feature.
  • Already in 2010, the German NRA had asked Google to notify Gmail as a regulated service pursuant to the German equivalent of the Belgian notification obligation. Gmail is a typical web-based email service that allows the user to create, send, and receive, and also to archive, emails. It is provided free of charge to the user, but is at least partly funded by advertising.

In both cases, the affected operators argued that their services do not qualify as regulated services under the relevant statutory definitions. Both NRAs eventually sent a formal order to the respective providers demanding notification, and both providers appealed these orders in court. As the definitions of regulated services under German and Belgian telecommunications law are based on European law, the local courts asked the ECJ to provide clarity on the interpretation of the respective criteria.

Key Question: The Definition of "Electronic Communications Services"

In essence, the legal dispute evolves around the question of whether—and due to which particular features—an OTT communications service qualifies as an "electronic communications service" as defined in the EU Framework Directive (2002/21/EC), the centerpiece of the European regulatory framework for the telecommunications sector.

Pursuant to this definition, ECS are all services which (i) are normally provided for remuneration and which (ii) mainly consist in the conveyance of signals over electronic communications networks. Member State laws generally echo this definition, albeit there are some deviations when it comes to the specific wording. When applying the definition to OTT communications services, both elements were controversially discussed, i.e., whether such services can be considered to be provided "for remuneration" where they are free of charge to the user, and whether the providers really convey signals over a communications network where they merely rely on the open internet or even only on peer-to-peer solutions to facilitate the transmission of messages.

In light of these discussions, the Member State courts asked the ECJ to decide the following questions regarding the remuneration criterion:

1. Does this necessarily require users to pay a monetary fee, or can the remuneration also consist in other forms of consideration, e.g., in the provision of personal data?

2. Does the remuneration have to be paid by the person to whom the service is provided, or is it sufficient if the service is financed at least in part by third parties, e.g., through advertising?

3. Does the service "normally" being provided for remuneration refer to the specific service at hand, or rather to a wider group of identical or comparable services in general?

On the conveyance of signals, the ECJ was asked to decide the following additional questions:

4. Does the fact that an OTT communications service provider necessarily sends and receives certain IP data packets to/from the open internet in the process of providing its service already constitute a "conveyance of signals," or does only the transmission of those data packets by respective internet access providers constitute such conveyance?

5. Must this transmission of IP data packets by the internet access provider at least be attributed to the OTT communications service provider, which would make the latter a supplier of "conveyance of signals"?

6. When providing a PSTN breakout feature as part of an OTT communications service, does the respective service consist of the "conveyance of signals" if the provider has concluded agreements with (other) providers of ECS pursuant to which these providers send and terminate calls to the PSTN?

7. Which criteria or features of a service have to be taken into account when assessing whether a service "mainly" consists in the conveyance of signals?

The View of The ECJ

The Skype Case

In its decision on Skype, the ECJ focused on the "conveyance of signals" in connection with "SkypeOut" (as that feature is clearly provided for remuneration). In this context, the Court reconfirmed its earlier decision (C-518/11 – UPC DTH) pursuant to which a service will at least partly consist in the conveyance of signals if the respective provider is "responsible" vis-à-vis the end user for the specific transmission of signals that is decisive for the provision of the respective service.

With respect to the "SkypeOut" feature, the Court stated that this feature does require the transmission of voice signals between the Skype user and the user receiving a "SkypeOut" call first over the open Internet and second over the PSTN.

  • The Court left open the question of whether Skype could be deemed responsible for the initial transmission of the respective voice signals from the user's terminal over the open internet and to the PSTN gateway (questions 4 and 5 above).
  • However, the Court confirmed that Skype is responsible at least for the PSTN part of that transmission as Skype concluded interconnection agreements with PSTN providers to facilitate that part of the transmission (question 6 above). According to the Court, the "SkypeOut" feature thus at least also consists in the conveyance of signals.

The Court furthermore stated that where the conveyance of signals (here the "SkypeOut" feature) if offered as only one feature that is part of a bundle of features (here, e.g., internet-based voice/video calls, file sharing, screen-sharing, instant messaging) provided as part of the same service (here: Skype), the conveyance of signals must be assessed separately if it appears sufficiently distinct and remains entirely autonomous from the other features of the service. Therefore, the "SkypeOut" feature consists at least "mainly" in the conveyance of signals (question 7 above).

The Gmail Case

In its Gmail decision, the ECJ again referred to the "responsibility" for the decisive transmission of signals to determine whether a service at least "mainly" consists in the conveyance of signals:

  • The Court found that Google does convey signals by partitioning e-mail messages into IP data packets, and by sending and receiving such IP data packets to/from the open internet, but that the Gmail offering does nevertheless not "wholly or mainly" consist in such conveyance (question 4 above).
  • Highlighting the key role of internet access providers and the operators of other networks forming the open internet, the Court found that the mere handling of IP data packets as described above is technically insufficient to deem a respective to "wholly or mainly" consist in the respective conveyance of signals, and thereby to qualify as a regulated ECS.

The Court also stated that it is for the referring Member State court to verify whether there are any other elements that might establish Google's responsibility for the conveyance of signals necessary for the functioning of the Gmail service – however, without further dealing with the notion of a potential attribution of the signal conveyance on behalf of the internet access providers to Google (as already suggested by the German Courts in question 5 above).

Finally, having found that Gmail already lacks a sufficient level of signal conveyance, the Court decided not to comment any of the remuneration-related questions (questions 1 through 3 above) here either.

What is Next: Increased Enforcement?

The two OTT decisions create a split picture:

  • On the one hand, all OTT communications services with a fee-based PSTN breakout feature (such as SkypeOut) will now have to be deemed as being regulated. It can therefore be expected that local regulators in the EU Member States will revamp their enforcement efforts against these services—even if they are not directly comparable to the SkypeOut feature.
  • This could mean that providers whose services now qualify more clearly as regulated services could be asked to notify these services to the local regulator and/or to comply with the full scope of substantive requirements directed at regulated services under local law. Because there is no country-of-origin principle in European telecommunications law, "local law" would thereby mean the (potentially deviating) laws of all Member States in which the service is marketed.

    Going forward, OTT service providers might thus have to comply with detailed regulations covering areas as diverse as number portability, customer relocation, emergency calling, special consumer rights, public security provisions, lawful interception, or increased IT security requirements, whereas many of these obligations are clearly tailored towards traditional telecommunications services and would be hard to comply with for providers of OTT services.

  • On the other hand, the ECJ provided only little clarity regarding services that are provided without monetary remuneration, or that – like Gmail – or only involved in the conveyance of signals to a lesser extent.
  • Whether the current ECS definition applies to these services will therefore continue to require a detailed case-by-case assessment by the respective NRAs, taking into account the specific functionalities of the respective service and their technical implementation. Again, due to the lack of a country-of-origin principle, this could also mean that NRAs in different Member States come to different regulatory conclusions for the same service. Also for this reason, providers of OTT communications services should review potential options to design their services so that they clearly do not meet the ECS standard.

Full Clarity Likely Only Achieved by New Telecoms Framework

In this context full clarity will likely only be achieved once the European Electronic Communications Code (EECC) is implemented by the EU Member States, which must be done by December 2020. The EECC explicitly broadens the scope of regulation to include all "interpersonal communications services", including OTT services, without continuing to rely as much on the criteria of remuneration or conveyance of signals.

Under the new framework, all number-independent OTT communications services (e.g., all email services) shall still only become subject to a limited set of regulatory requirements. In contrast, all number-dependent services (specifically those that allow a PSTN breakout shall be regulated on the same level as traditional telecoms services.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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